In short: An ESOP consultant coordinates four things a Kolkata or wider West Bengal company needs to get right together — a scheme that complies with Section 62(1)(b) of the Companies Act, 2013, a valuation from the correct professional for the transaction in question, a tax position that matches the Income-tax Act, 2025, and documentation that survives a funding round, a family settlement, or an auditor’s query. Regulatory responsibility for ESOP valuation shifted materially on 2 January 2026, when SEBI replaced merchant bankers with independent Registered Valuers for listed-company schemes — a change most Kolkata advisory content has not yet caught up with.
CA Murli Chandak is an IBBI-Registered Valuer for the asset class Securities or Financial Assets, registration number IBBI/RV/07/2021/14408, and has completed more than 300 valuation assignments across more than 7 countries. Kolkata’s employer base is unusually mixed for a single city — DPIIT-recognised technology and services startups sit alongside long-established, often closely-held manufacturing, trading, jute, tea and port-logistics businesses now extending equity to a professional management layer for the first time. For both groups, the practical questions rarely concern the concept of an ESOP. They concern which professional must sign which certificate, how the December 2025 SEBI change affects a listed or soon-to-be-listed company, and what the perquisite tax actually costs an employee under the rules now in force.
1. Contents
- Why Kolkata and West Bengal companies are turning to ESOPs
- What an ESOP is, in four stages
- What changed for Kolkata and West Bengal companies in 2026
- The legal framework: unlisted and listed companies
- Who values what: registered valuer, merchant banker or chartered accountant
- ESOP taxation in India: the two-stage framework
- What this ESOP advisory covers
- Experience behind Kolkata engagements
- Documents needed to start
- How a Kolkata engagement runs
- Common mistakes Kolkata companies make with ESOPs
- Frequently asked questions
2. Why Kolkata and West Bengal companies are turning to ESOPs
West Bengal’s corporate base combines two employer groups that rarely sit side by side elsewhere in India to the same degree. One is a growing cluster of DPIIT-recognised startups in IT and ITES, fintech, healthtech, edtech and SaaS, drawn to Kolkata’s lower operating costs relative to Bengaluru, Mumbai and the National Capital Region, and competing for the same senior engineering, product and sales talent as those larger hubs. The other is a base of long-established, often closely-held manufacturing, trading, jute, tea, steel-ancillary and port-logistics businesses concentrated around Kolkata and Howrah, many still under first- or second-generation family ownership.
The two groups use an ESOP differently. For a startup, the pool is primarily a retention and hiring tool competing against better-funded rivals in other cities. For a family-promoted business, an ESOP is often one of the few structured ways to give a professional CEO, plant head or sales leader real equity participation — recognising years of contribution — without ceding control of the company in the near term. Both uses depend on the same underlying discipline: a compliant scheme, a defensible valuation and a clear tax position. Where they differ is in design — pool size, vesting, and particularly exit mechanics in a company with no near-term IPO or acquisition on the horizon, which is the more common position for Kolkata’s legacy businesses than for its startups.
3. What an ESOP is, in four stages
An Employee Stock Option Plan gives an employee the right, not the obligation, to acquire company shares at a predetermined exercise price after satisfying vesting conditions. No ownership passes at grant — only the right to acquire shares later.
| Stage | What happens |
|---|---|
| 1. Grant | The company allots a specified number of options to an eligible employee under a grant letter that fixes the exercise price and the vesting schedule |
| 2. Vesting | The employee becomes entitled to exercise once the vesting conditions are met — usually a minimum period of continued service, sometimes tied to performance milestones |
| 3. Exercise | The employee pays the exercise price for vested options and receives shares, triggering the first tax event and the first valuation requirement |
| 4. Sale | The employee sells the shares, subject to the company’s policies and any lock-in, triggering the second tax event |
4. What changed for Kolkata and West Bengal companies in 2026
Two separate MCA notifications reorganised the administrative offices a Kolkata-registered company deals with, both taking effect on the same date after an initial deferral.
The Ministry of Corporate Affairs first notified 10 new Regional Directorates on 23 October 2025 (Notification S.O. 4852(E), under Section 396(1) of the Companies Act, 2013), to take effect from 1 January 2026; that effective date was then deferred by a further notification dated 30 December 2025 (S.O. 6115(E)) to 16 February 2026. Under the revised structure, the Regional Directorate for the Eastern Region, headquartered at Kolkata, now has jurisdiction limited to West Bengal, Bihar and Jharkhand — Odisha moved out to a newly created Regional Directorate for the South-Eastern Region, headquartered at Hyderabad, alongside Andhra Pradesh, Chhattisgarh and Telangana.
Separately, effective the same date, the Registrar of Companies, Kolkata was split into two offices.
| Office | Jurisdiction from 16 February 2026 |
|---|---|
| Regional Director, Eastern Region, Kolkata | West Bengal, Bihar and Jharkhand |
| Regional Director, South-Eastern Region, Hyderabad (new) | Andhra Pradesh, Chhattisgarh, Odisha and Telangana |
| Registrar of Companies, Kolkata-I | District of Kolkata and the State of Sikkim |
| Registrar of Companies, Kolkata-II (new) | State of West Bengal, excluding the district of Kolkata |
Source: Ministry of Corporate Affairs, Notification S.O. 4852(E) dated 23 October 2025 (Regional Directorates), as amended by S.O. 6115(E) dated 30 December 2025 (deferred effective date), and PIB release dated 31 December 2025 (Registrar of Companies split).
The practical consequence is that the special resolution and MGT-14 filing an ESOP scheme approval requires now goes to RoC Kolkata-I or RoC Kolkata-II depending on the district of the registered office, both still administered under the same Regional Directorate at Kolkata. Where a Kolkata group has an operating subsidiary in Odisha — not uncommon given the steel, mining and port-logistics links between the two states — that entity’s Regional Directorate matters now fall under RD (South-Eastern Region) at Hyderabad rather than Kolkata, which is relevant wherever an ESOP pool or a related corporate approval spans the group rather than a single entity. Field office jurisdictions are re-notified from time to time, so the correct office for a specific registered office should always be confirmed against the MCA’s own Registrar of Companies directory before a scheme resolution is filed.
This MCA realignment is separate from the National Company Law Tribunal’s bench structure. A Kolkata-registered company pursuing a scheme of arrangement involving its ESOP pool files before the NCLT Kolkata Bench, whose territorial jurisdiction covers West Bengal, Bihar, Jharkhand, Odisha and the Union Territory of Andaman & Nicobar Islands — a wider footprint than the Regional Directorate’s revised jurisdiction, since NCLT bench allocations are notified separately and were not part of this realignment. Bench allocations are periodically re-notified, so the current position should be confirmed before filing.
5. The legal framework: unlisted and listed companies
5.1 Unlisted companies
Most Kolkata ESOP schemes sit inside unlisted private limited companies — true of both the DPIIT-recognised startups and the great majority of the city’s family-promoted manufacturing and trading businesses, few of which are listed. These schemes are governed by Section 62(1)(b) of the Companies Act, 2013 read with Rule 12 of the Companies (Share Capital and Debentures) Rules, 2014. Rule 12 requires shareholder approval by special resolution, disclosure of the scheme’s material terms to shareholders, and a minimum period of one year between the grant of an option and its vesting. The rule does not itself require a registered valuer’s report at the scheme-approval stage — that requirement arises later, and separately, for financial reporting and for the tax position at exercise.
5.2 Listed companies
A listed company’s ESOP, restricted stock unit, stock appreciation right or sweat equity scheme is governed by the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021. This is the area that changed materially and recently. Under the original 2021 Regulations, the valuer for these schemes could be an independent chartered accountant or a merchant banker. The Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) (Second Amendment) Regulations, 2025, notified 3 December 2025 and effective from 2 January 2026, replaced that definition: Regulation 2(1)(ww) now defines “valuer” by reference to Section 247 of the Companies Act, 2013, and Regulation 34(1) now requires all fresh valuations under the Regulations to be carried out by an independent Registered Valuer. Merchant bankers were permitted a nine-month window to complete assignments already underway, ending in September 2026.
For a Kolkata company that has listed, or is preparing to list — a smaller group than in Delhi-NCR or Mumbai, but one that includes several established West Bengal manufacturing and financial services names — the valuation of its ESOP or sweat equity scheme is now squarely IBBI-Registered Valuer work, not merchant banker work.
6. Who values what: registered valuer, merchant banker or chartered accountant
A significant share of avoidable delay and refiling comes from engaging the wrong professional for a given certificate, not from an incorrect number. The table below sets out which professional applies to each ESOP-related requirement.
| Requirement | Who values or signs | Statutory basis |
|---|---|---|
| Approval of the ESOP scheme, unlisted company | Special resolution of shareholders; no external valuer required at this stage | Section 62(1)(b) read with Rule 12, Companies (Share Capital and Debentures) Rules, 2014 |
| Valuation for a listed company’s ESOP or sweat equity scheme | Independent Registered Valuer under Section 247, Companies Act, 2013 | Regulation 34(1), SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, as amended w.e.f. 2 January 2026 |
| Fair value of options at grant, for financial reporting | Valuation professional applying an option-pricing model such as Black-Scholes | Ind AS 102, Share-based Payment |
| Perquisite fair market value at exercise, unlisted shares | Category I Merchant Banker registered with SEBI, on the exercise date or a date not more than 180 days earlier | Section 17(1)(d) read with Section 17(5)(h), Income-tax Act, 2025, and Rule 15(6), Income-tax Rules, 2026 |
| Perquisite fair market value at exercise, listed shares | Average of the opening and closing exchange price on the exercise date — no separate valuer required | Rule 15(6), Income-tax Rules, 2026 |
| Tax deducted at source on the perquisite | Employer, at the time of exercise | Section 392, Income-tax Act, 2025 |
Where a Kolkata company needs more than one certificate for the same transaction — a listed-company Registered Valuer’s report alongside a Category I Merchant Banker’s tax certificate, for instance — the practical answer is to build both on one consistent set of financial assumptions, so the two documents do not tell a reviewer two different stories about the same company. Where a Merchant Banker’s certificate is required alongside a registered valuer’s report, that certificate is issued by a SEBI-registered Category I Merchant Banker within the same coordinated engagement.
Not sure which certificate your ESOP grant needs? If you are planning a grant, preparing for a funding round, or a family shareholder has questioned last year’s ESOP valuation, a short conversation up front is usually faster and cheaper than redoing the work later. A no-charge 30-minute consultation will confirm which professional and which method apply to your transaction.
7. ESOP taxation in India: the two-stage framework
ESOPs are taxed at two separate points, and the Income-tax Act, 2025, which took effect from 1 April 2026, renumbered the relevant provisions without changing the underlying framework.
7.1 Stage 1: perquisite tax at exercise
When an employee exercises vested options, the difference between the fair market value on the exercise date and the exercise price paid is treated as a taxable perquisite under the head Salary, under Section 17(1)(d) read with Section 17(5)(h) of the Income-tax Act, 2025, computed per Rule 15(6) of the Income-tax Rules, 2026. Tax is deducted at source by the employer under Section 392 of the Act.
Worked example. An employee of a Kolkata company exercises 1,500 vested options at an exercise price of Rs 80 per share, when the fair market value determined by the Category I Merchant Banker is Rs 540 per share.
Taxable perquisite = (Rs 540 − Rs 80) × 1,500 = Rs 6,90,000, added to the employee’s salary income for the year and taxed at the applicable slab rate, with TDS deducted by the employer at the time of exercise.
7.2 Stage 2: capital gains at sale
The fair market value used to compute the Stage 1 perquisite becomes the cost of acquisition for capital gains purposes, so the same value is not taxed twice. The holding period runs from the date of allotment on exercise, not the original grant date. For unlisted shares, a holding period exceeding 24 months qualifies as long-term, taxed under Section 197 of the Income-tax Act, 2025 — the general long-term capital gains provision, successor to Section 112 of the 1961 Act — currently at 12.5 percent without indexation.
Continuing the example: the employee sells the 1,500 shares 28 months after exercise at Rs 900 per share. Capital gain = (Rs 900 − Rs 540) × 1,500 = Rs 5,40,000, taxed as long-term capital gains at 12.5 percent, before cess.
7.3 Deferred taxation for eligible startups
Employees of a DPIIT-recognised startup that also holds the Inter-Ministerial Board certification under Section 140 of the Income-tax Act, 2025 — the successor to Section 80-IAC of the 1961 Act — may defer payment of the Stage 1 perquisite tax rather than pay it in the year of exercise. Under Section 392(3) read with Section 289(3) of the 2025 Act, the successor to Section 192(1C) of the 1961 Act, the deferral runs until the earliest of:
- 60 months from the end of the tax year in which the shares were allotted, for shares allotted on or after 1 April 2026 — extended from the 48-month window that applied to allotments before that date;
- the date the employee ceases to be an employee of the company; or
- the date the employee sells the shares.
This is a deferral of payment, not an exemption — the tax is computed at the slab rate applicable in the year of allotment, and the employer’s obligation to compute and report the liability is unaffected even though cash payment is postponed. For Kolkata’s family-promoted businesses, this deferral generally has less relevance, since relatively few carry DPIIT startup recognition; it is squarely relevant for the city’s technology and services startups.
8. What this ESOP advisory covers
- Scheme design. Pool sizing, eligibility criteria and vesting structure suited to the company’s hiring plan, or to a planned handover of responsibility to non-family management.
- Valuation coordination. Grant-date fair value for Ind AS 102 accounting, and coordination with a SEBI-registered Category I Merchant Banker for the exercise-date perquisite FMV where the company is unlisted.
- Scheme documentation. Board and shareholder resolutions, the ESOP policy document, and individual grant letters consistent with the approved scheme.
- Cap table modelling. Grants, vesting, exercises, lapses and cancellations tracked against the fully diluted capitalisation table.
- Exit mechanics for closely-held companies. Buy-back or internal-transfer arrangements for employee shareholders where there is no near-term IPO or acquisition to provide liquidity.
- Compliance calendar. Filing deadlines tied to grant, vesting and exercise events, and to the applicable ROC and Regional Directorate for the company’s registered office.
- Employee communication. Plain-language explanation of vesting, exercise, taxation and liquidity so option holders understand what they hold.
9. Experience behind Kolkata engagements
| Credential | Detail |
|---|---|
| Qualification | Fellow Chartered Accountant |
| Registration | Registered Valuer under Section 247 of the Companies Act, 2013, registered with IBBI for the asset class Securities or Financial Assets, registration number IBBI/RV/07/2021/14408 |
| Experience | More than 8 years in valuation practice |
| Volume and reach | More than 300 valuation assignments across more than 7 countries, including the United States |
| Business combinations | More than 15 purchase price allocations under Ind AS 103, and one under ASC 805 |
| Impairment | More than 30 impairment tests under Ind AS 36, and one under ASC 350 |
| Audit scrutiny | Assignments, including purchase price allocations, defended before Big Four audit teams |
| Funds | Debt and equity valuation for more than 10 Indian funds |
10. Documents needed to start
- Constitutional. Certificate of incorporation, memorandum and articles of association.
- Capital structure. Capitalisation table, shareholding pattern, and any existing ESOP pool or scheme document.
- Financial. Audited financial statements for the last 3 years, and the latest management or provisional accounts.
- Agreements. Existing shareholder, family settlement or investment agreements that may restrict dilution or require consent.
- Workforce. Proposed grantee list or eligibility criteria, and anticipated hiring or succession plans driving the pool size.
- Forward-looking. Board-approved business projections supporting the valuation.
11. How a Kolkata engagement runs
| Step | What happens |
|---|---|
| 1 | Consultation to establish whether the company is listed or unlisted, and therefore which professionals and which certificates the scheme requires |
| 2 | Engagement letter setting out purpose, valuation date, standard applied and scope |
| 3 | Information request for the documents in Section 10, issued in tranches so drafting can begin early |
| 4 | Pool sizing, vesting structure and exit-mechanism discussion with founders, the board, or the promoter family |
| 5 | Valuation build — grant-date fair value, and coordination with a Category I Merchant Banker for exercise-date FMV where required |
| 6 | Draft scheme documents and valuation shared for verification of facts |
| 7 | Board and shareholder approval support, followed by signed reports and ongoing administration support |
Working with a Kolkata client from an Ahmedabad-based practice changes nothing about the quality of the file, and every step above runs through document-based workflows and video consultations.
12. Common mistakes Kolkata companies make with ESOPs
- Treated as an informal family understanding. A verbal promise of equity to a long-serving, non-family manager is not a scheme — without Section 62(1)(b) shareholder approval and proper documentation, it is unenforceable and becomes a dispute risk at the next generational transition.
- Pool sized without a hiring or succession plan. An undersized pool limits future grants; an oversized pool dilutes existing shareholders for no commercial benefit.
- No thought given to exit mechanics. A closely-held company with no near-term IPO or acquisition plan needs a buy-back or internal-transfer mechanism built into the scheme from the outset, or vested shares become illiquid paper the employee cannot realise.
- Tax treated as an afterthought. Employees are frequently surprised by the Stage 1 perquisite tax liability at exercise, which is payable in cash on a non-cash gain.
- Valuation obtained from the wrong professional. Engaging a merchant banker for a listed-company scheme valuation after 2 January 2026, or an unregistered valuer for a Companies Act purpose, results in a certificate that will not be accepted.
- Documentation that does not match the approved scheme. Grant letters and board resolutions that drift from the shareholder-approved scheme terms create disputes and slow down due diligence or family settlement discussions.
13. Frequently asked questions
Does an ESOP consultant have to be based in Kolkata to advise a West Bengal company?
No. Registration as an IBBI Registered Valuer under Section 247 is national, and most of an ESOP engagement — document review, valuation, scheme drafting and video consultations — runs through digital workflows regardless of where the advisor is based.
Can a family-owned Kolkata company use an ESOP to bring in professional management?
Yes. An ESOP is one of several structured ways to give a non-family CEO, plant head or senior manager real equity participation. Because many such companies have no near-term IPO or acquisition planned, the scheme needs a built-in buy-back or internal-transfer mechanism so vested shares are not illiquid for the employee — usually the single most important design choice for a closely-held company’s scheme.
Is a valuation compulsory before an unlisted company launches an ESOP?
Rule 12 does not itself require a registered valuer’s report at scheme-approval stage. A valuation becomes necessary shortly afterward, for Ind AS 102 accounting at grant and for the Category I Merchant Banker’s perquisite FMV at exercise.
Who values an ESOP scheme for a listed company now?
An independent Registered Valuer under Section 247 of the Companies Act, 2013, following the SEBI (Share Based Employee Benefits and Sweat Equity) (Second Amendment) Regulations, 2025, effective 2 January 2026. Merchant bankers could complete only assignments already underway, within a nine-month transition window.
How is the ESOP perquisite tax calculated?
As the fair market value on the exercise date, less the exercise price paid, multiplied by the number of shares exercised, taxed as salary income under Section 17(1)(d) of the Income-tax Act, 2025.
Can the perquisite tax be deferred?
Yes, for employees of startups holding both DPIIT recognition and the Section 140 Inter-Ministerial Board certificate. The deferral runs for 60 months from the end of the tax year of allotment for shares allotted on or after 1 April 2026, or until the employee leaves or sells the shares, whichever is earliest.
Which Registrar of Companies does a Kolkata company file with now?
Registrar of Companies, Kolkata-I if the registered office is in Kolkata district, which also covers the State of Sikkim, or Registrar of Companies, Kolkata-II for the rest of West Bengal, following the split effective 16 February 2026. Both remain under the Regional Directorate for the Eastern Region, headquartered at Kolkata.
What documents are needed to start designing an ESOP scheme?
Incorporation documents, the capitalisation table, recent financial statements, existing shareholder or family settlement agreements, the proposed grantee list or eligibility criteria, and board-approved projections. A full list is set out in Section 10.
How long does it take to design and launch an ESOP scheme?
This depends on how quickly the board and shareholders finalise the pool size and eligibility criteria, and how complete the information provided is. A realistic engagement timeline is discussed at the initial consultation once the company’s specific facts are known.
14. Speak to an ESOP consultant
If you are designing a new ESOP pool, valuing an existing scheme, or preparing ESOP documentation for a funding round, a family settlement, or an audit query, a short conversation at the outset usually saves considerable rework later. Consultations of up to 30 minutes are offered at no charge.
CA Murli Chandak – FCA | IBBI-Registered Valuer (Securities or Financial Assets) | IBBI/RV/07/2021/14408
Website: murlichandak.com
Phone: +91 99985 39902
Email: murlichandak@murlichandak.com
Statutory positions verified against source on 7 August 2026. Field office jurisdictions, SEBI regulations and Income-tax provisions change from time to time; the position applicable to a specific company should be confirmed before filing. This page is general information on ESOP scheme design, valuation and tax compliance in India and is not advice on any specific transaction. Where a matter requires a legal opinion, specialist legal advice should be taken.
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